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Title: Analysing customer profitability in the financial services sector
Authors: Cachia, Mary Anne (2004)
Keywords: Accounting -- Malta
Financial services industry -- Malta
Customer services -- Malta
Issue Date: 2004
Citation: Cachia, M. A. (2004). Analysing customer profitability in the financial services sector (Bachelor's dissertation).
Abstract: When operating in a competitive environment profitability analysis plays a crucial part for the survival of the firm. Companies must be able to conduct such analysis basing their approach on the cost structure of their firm. Companies are becoming more customer and service oriented, and thus the majority of their costs are customer driven. Customer profitability analysis can make the difference to increase profitability and creating additional value to their clients. The cost structure changes from one client to another because of different buying behaviour. A customer generating large revenues does not necessarily imply large profits since the costs incurred may vary. Various analytical techniques can be used to identify the small percentage of customers that make up the majority of profit. A study amongst Maltese financial institutions was conducted to understand the importance such firms give to their customers; to identify the current approach for profitability analysis adopted by these firms and to evaluate the possibility and feasibility of conducting customer profitability analysis. Firms were invited to participate in a mail survey on such issues. This encompassed six banks, seventeen financial institutions providing various financial services, and twenty nine insurance providers. The response rate was of thirty one percent. Conventional accounting techniques are not able to reveal the costs that are triggered by each customer since these customer costs are considered as overhead expenses. For this reason, activity based costing is considered to be a very important technique to identify hidden profits and hidden cost customers. From the findings it has emerged that firms do give importance to their customers and perform customer profitability analysis but do not apply it in their decision making thereby limiting customer analyses to marketing strategies. Yet, customer profitability analysis can be useful when taking very sensitive decisions regarding trading relationships with current and new clients. Firms invest substantially in their customers to win their loyalty and retain them. This is important for the long run profitability but this should be aimed to the right customers that generate the highest profitability.
Description: B.ACCTY.(HONS)
Appears in Collections:Dissertations - FacEma - 1971-2008
Dissertations - FacEMAAcc - 1983-2008

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